8 April 2024 | FXGT.com
AUD Faces Pressure from Mixed Domestic Economic Reports
- US Labor Market Strength: The Australian dollar feels the pressure at $0.6580, weighed down by the strong US employment data, with 303,000 new jobs reported in March, exceeding expectations. This development has further reduced the likelihood of a June rate cut by the Federal Reserve, decreasing the probability to 48% according to the CME FedWatch tool.
- Australia’s 10-Year Bond Yield Rise: Following the US jobs report, Australia’s 10-year government bond yield surged to nearly 4.1%, marking its highest level in over a month. This increase is in sync with a rally in US bond yields.
- Fed’s Rate Cut Outlook: Fed officials, including Kashkari, stress caution against premature rate cuts amidst strong economic data, suggesting that cuts may not be necessary in 2023 if inflation remains elevated.
- Reserve Bank of Australia’s Response: The RBA maintains its cash rate at 4.35%, the highest in 12 years, for the third consecutive meeting in March, signalling confidence in managing inflation without further warnings of potential rate hikes. This stance sparks speculation about potential rate cuts later in the year.
- Impact of Economic Data: Last week’s unchanged Final Retail Sales and negative Trade Balance figures in Australia have placed the Australian Dollar under pressure. These domestic economic indicators contribute to the cautious sentiment around the AUD.
- Australian Housing Finance Recovery: February data indicated a rebound in housing finance in Australia, suggesting financial conditions may not be as constrained as initially feared.
- Commodity Prices as Potential AUD Support: Markets are keenly observing the trends in copper and oil prices. Any further increases in these commodities could boost the Australian Dollar.
- Upcoming Data Releases: Market participants await US CPI data for March and the Federal Reserve’s March meeting minutes that could provide further clarity on monetary policy directions.
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